The Invoice System in Japan came into effect on 1 October 2023. This system relates to purchase tax credits for consumption taxes (equivalent to VAT). The Invoice System requires businesses to issue and retain qualified invoices to apply for purchase tax credits on consumption taxes. Unlike the existing classification invoice register, qualified invoices require a register of items to be entered correctly in order to issue a receipt under this Invoice System.

This article explains the role of receipts within the Invoice System and the basics of issuing compliant receipts for qualified invoices.

What's in this article?

• The role of receipts after the introduction of the Invoice System
  
• Requirements for issuing a receipt via the Invoice System
  
• Generating an invoice-system-compliant receipt
  
• FAQ
  

The role of receipts after the introduction of the Invoice System

A receipt is typically a piece of paper issued by a seller when the buyer pays money for a product or service. The receipt serves as a proof of purchase, verifying that the individual has received the goods or services.

The terms "Invoice System" and "qualified invoice" may suggest that the Invoice System only relates to invoices; but in reality, a receipt or delivery statement can act as a qualified invoice, if the requirements set forth in the Invoice System are met adequately. Furthermore, the receipt is valid within the current Invoice System and can be used when applying for a purchase tax credit.

You can now use Stripe to issue invoices and receipts using the Invoice System. Our guides to the Invoice System and best practices can help you learn the details and settings of the Invoice System and qualified invoices.

Requirements for issuing a receipt via the Invoice System

Companies that issue receipts using the Invoice System are registered as qualified invoice issuing companies and are subject to the requirements of the system.

Registered businesses are assigned a registration number, which is one of the details necessary to issue a qualified invoice. As such, it is important that companies using the Invoice System are fully registered as a qualified invoice issuing business before they issue any receipts in their business dealings with suppliers.

Generating an invoice-system-compliant receipt

There is no standardised form or template for generating an invoice-system-compliant receipt, so a commercial template or receipt-generating software may be used instead. Alternatively, this can also be generated manually. This allows receipts to be created in-house as long as the information required by the Invoice System is correctly recorded.

Certain industries may issue a simplified qualified invoice (also known as a simplified invoice) as a receipt instead of the qualified invoice, which requires more detailed input. As the name suggests, a simplified qualified invoice involves much simpler inputs than the qualified invoice, enabling easy invoice issuing and receipts for transactions with multiple unspecified customers.

When issuing a simplified qualified invoice, it is important to understand how to format one and what to be aware of.

See our article on simplified qualified invoices for a more detailed explanation.

You can also refer to Japan's National Tax Agency's "Overview of the Tax Invoice Preservation System (P5)" and the Stripe support page.

FAQ

Q: Can receipts also be issued manually in the Invoice System?
A: Even if a receipt is generated manually, purchase tax credits can be applied to the purchaser's receipt, as long as it contains the required information for the Invoice System. However, issuing manual receipts does run the risk of entry errors or falsified documents. To counter this, the Invoice System has been modified to be more efficient and effective at fraud prevention when used by businesses that primarily issue manual receipts. For more information, we recommend referring to the National Tax Agency's "Q&A on the Invoice System (Q 26, Q 58−2)"

Q: Can I issue a receipt as a qualified invoice?
A: In order to issue a receipt as a qualified invoice, it must satisfy the requirements of the Invoice System. Thus, it is important to deepen your understanding of the required information before issuing the receipt. Furthermore, to issue a receipt as a qualified invoice, your business must be registered in advance under the Invoice System.

Q: What kind of receipt is required to issue a qualified invoice?
A: Receipts and invoices are both compatible with the Invoice System. Certain businesses may use simplified qualified invoices in most cases. There are no dramatic differences between receipts and invoices, but a receipt generally has detailed transaction information and is considered more reliable.

Q: What happens if there is no registration number on the qualified invoice in the Invoice System?
A: The Invoice System requires a registration number to be entered on qualified invoices and simplified qualified invoices. Qualified invoices and simplified qualified invoices cannot be verified without a registration number, and the buyer will not be able to apply for the purchase tax credit. To avoid this, the seller should either enter the correct registration number before delivery or the buyer should enter the registration number correctly on the documents after receipt. Registration with the Invoice System is voluntary, so businesses whose primary audience is the general public (and not other businesses) will not be affected even without a registration number, as they are not required to issue a qualified invoice.

Q: Does the Invoice System require both an invoice and a receipt?
A: There is no need to prepare both an invoice and a receipt, as long as the qualified invoice or simplified qualified invoice meet the requirements of the Invoice System; either are acceptable. However, if the Invoice System requirements are met by using an invoice and a receipt, or invoice and delivery documents that are clearly related, either one of these may be used as the qualified invoice. For more information, we recommend referring to the National Tax Agency's Overview of the Tax Invoice Preservation System (P7)"

Both qualified invoices and simplified qualified invoices can be easily handled by the Invoice System, as described above. The simplified qualified invoice has fewer items to complete than the qualified invoice, so the format is slightly different. Therefore, make sure you carefully review the information on future invoices and receipts to ensure that they meet the requirements for both the qualified invoice and the simplified qualified invoice in the Invoice System.